Samsung's Camera Offensive Against Apple

Samsung Electronics has chosen an unusual time to get into the camera business. The global market for digital still cameras shrank 7.5 percent last year, according to IDC, which predicts the market will grow at 5.4 percent or less for the next four years. "The growth is almost nothing," says SooKyoum Kim, an IDC analyst in Seoul. A big reason for that is the rise of camera-equipped smartphones. Samsung's position: Sometimes only a real picture will do. "When it comes to serious occasions, people pick up a camera," says SangJin Park, president of Samsung's digital imaging unit.

The company is counting on cameras to help it compete with Apple (AAPL) and reduce its reliance on semiconductors. Apple doesn't make cameras and that, argues Park, has created an opening for Samsung. Just as the popularity of the iPhone helped build excitement about the iPad, Park says Samsung will use digital cameras to build brand awareness for the company's TVs, smartphones, and other products. On Sept. 14 in Hong Kong, Samsung launched a line of professional-grade cameras meant to compete with Nikon and Canon (CAJ).

Samsung has been trying to steal market share from Apple on several fronts. Its new smartphone, the Galaxy S, introduced in the U.S. in August, is winning raves worldwide. The company also has high hopes that the tablet PC it introduced this month will attract customers who otherwise would buy the iPad. Samsung says it's considering putting Google's (GOOG) Android operating system into its TVs. That would allow its sets to compete with the recently revamped Apple TV, which viewers can use to watch online content on their television sets.

Ultimately, Samsung needs to rely less on sales of memory chips. Some 58 percent of its profits this year will come from semiconductors, says Han Seung-hoon, an analyst in Seoul with Korea Investment & Securities. It's a volatile business: Last year memory chip sales accounted for just 34 percent of earnings because of the slump in PC sales. "If you look at most of the global tech companies, their profit is much more stable," Han says.

The company wants to remain true to its engineering roots by developing advanced technology, says Byungdeok Nam, a Samsung research and development vice-president. He worked on the NX100, a new multi-lens camera that, unlike conventional single-lens reflex cameras, does away with the mirror that directs light through the lens and to the photographer. That helped Samsung shrink the camera to just 25.5 millimeters in width, compared with 45mm for other manufacturers' cameras.

Samsung is also trying to make its cameras cool. Kim InShik, a goateed 37-year-old designer dressed in jeans and a Batman T-shirt, has designed models that can tilt at a 7-degree angle while sitting on a tabletop, eliminating the need for a tripod when taking self-portraits. He and other designers have also pushed the boundaries of the production process with a technique (originally used in car assembly plants) that uses water at a high pressure to shape steel and create a smoother, more rounded look for Samsung's compact cameras. "We wanted to come out with a product that gave the feeling of being carved with human hands," says Kim.

Samsung's photo business "is still more focused on hardware, not software," says James Song, an analyst with Daewoo Securities. Software is important: It's what makes all of Apple's iGadgets work seamlessly together. Samsung's biggest strength is vertical integration—it makes the chips, displays, and batteries for all of its hardware. If Samsung is going to be like Apple, Song says, it needs to be just as good at creating software.

Camera boss Park says that's coming. He talks of enabling photographers to connect wirelessly to social networking sites and use Samsung apps to edit photos on their tablets, PCs, phones, and TVs. Says Park: "That's our next homework."

The bottom line: Samsung is launching a line of cameras even as photo-enabled smartphones eat into industry sales worldwide.

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